* FTSEurofirst 300 index falls 1.9 percent
* Banco Santander leads banks lower
* Glaxo outperforms after results
* Tech stocks suffer from SAP; Telcos up on BarCap note
By Brian Gorman
LONDON, Oct 28 (Reuters) - European shares hit a three-week closing low on Wednesday, hurt by disappointing earnings from Spain's Banco Santander and Germany's SAP and by U.S. new home sales unexpectedly falling in September.
The FTSEurofirst 300 index of top European shares fell 1.9 percent to 980.23 points, its biggest one-day decline since Aug. 17 and its lowest close since Oct. 5. The European benchmark is still up nearly 52 percent from its lifetime low of March 9.
Banks were among those taking most points off the index. Banco Santander, the euro zone's biggest bank by market value, fell 3.4 percent after it posted a 2.8 percent fall in nine-month net profit.
BNP Paribas, HSBC and UBS fell between 1.4 and 3.8 percent.
Ireland's two main banks Allied Irish Banks and Bank of Ireland plunged 16.6 and 25 percent respectively on uncertainty over Dublin's bank rescue measures.
"People have put a bit more money back into the defensives, the cheaper end of the market," said Philip Lawlor, chief portfolio strategist at Nomura, in London.
"There isn't going to be any double-dip. The market just got a bit ahead of itself. Valuations went from looking relatively cheap to looking relatively expensive."
SAP closed 7.7 percent lower, after the company cut its sales outlook on weakness in emerging markets and in Japan, leaving investors wondering where buyers for its high-end software will emerge from a client base still keeping costs in check.
Telecom gear maker Alcatel-Lucent, which reports results on Friday, fell 6.4 percent.
Across Europe, the FTSE 100 index, Germany's DAX and France's CAC 40 were down between 1.4 and 1.8 percent.
Wall Street was lower around the time European bourses were closing. The Dow Jones, S&P 500 and Nasdaq Composite were down between 0.3 and 1.4 percent.
Sales of newly built U.S. single-family homes unexpectedly tumbled 3.6 percent in September in their first drop since March, government data showed.
This followed data showing a rise in durable goods orders that had offered some reassurance about the strength of the recovery.
MINERS FALL
Miners fell heavily as metals prices weakened. Anglo American, Antofagasta, BHP Billiton, Fresnillo, Lonmin, Rio Tinto, Vedanta and Xstrata fell between 4 and 9.4 percent.
Among individual shares, Britain's largest insurer Prudential tumbled 9.8 percent after sales fell.
Shares in Deutsche Telekom were among the few gainers, ending the day up 1.1 percent, with traders saying chief executive Rene Obermann reiterated company guidance at a media event in Munich.
It was also helped by BarCap initiating coverage on the telecom sector with a positive view on recovery and returns.
France Telecom, Spain's Telefonica and Britian's Vodafone rose between 0.3 and 0.5 percent.
GlaxoSmithKline ended the day 0.4 percent lower, outperforming the market, after third-quarter results showed that sharply higher sales of flu drug Relenza buoyed sales. The company said it was in line for a boost from its swine flu vaccine in the last three months of the year.
(Additional reporting by Christoph Steitz; Editing by David Cowell)